WITH some government officials batting for a second extension of the enhanced community quarantine (ECQ), analysts are worried that household savings of the vulnerable sector may be exhausted already as the Philippine economy hit pause due to the coronavirus disease 2019 (Covid-19) pandemic.
President Duterte, according to his spokesperson Harry Roque, is set to decide this week if the enhanced community quarantine (ECQ) implemented in Luzon will be extended. The lockdown took effect midnight of March 17 and was initially set to conclude by April 14, but the government ordered a two-week extension, as mass testing—crucial to assessing the risks from unleashing anew out to the streets and the mass transportation systems millions of workers—was just about to begin.
A lawmaker has been pushing for another two-week extension after April 30 amid mounting cases, while others were for selective or modified quarantine in areas with low or no transmission.
“If the ECQ continues, household savings may start to be depleted as people who have lost their jobs start to use them up,” UnionBank Chief Economist Ruben Carlo O. Asuncion told the BusinessMirror.
ING Bank Manila Economist Nicholas Antonio Mapa said a significant portion of the population only relies on daily wages and tips, noting this sector can have a hard time coping with financial challenges amid the lockdown.
“This part of society may not have had much savings and will have likely dipped substantially into it once economic activity was halted abruptly,” he said.
Mapa said it was only imperative for the government to address the concerns over job opportunities once ECQ is lifted.
“Lost income/employment/livelihood for some people could eventually be a drag on consumer savings especially on the most vulnerable sectors, unless there would be some modifications/some lifting on the ECQ/lockdown in the coming weeks,” RCBC Chief Economist Michael L. Ricafort added.
Other side of the coin
It is a different—and better—narrative, however, for the sector with stable jobs. Analysts said that savings of those segments of society might increase as spending would be prioritized on necessities only amid the lockdown.
Ricafort said that “percentage of consumers with savings could still increase as consumers/households become more conservative and would tend to save more.”
This, as daily expenses—like transport fees—decrease due to work-from-home arrangements and the temporary closure of business establishments where consumers usually spend their money, he added.
Mapa said that spending is now focused only on the essentials like food and utilities, which account for 64 percent of the consumption sector in gross domestic products accounting. This leaves a gap where retail purchases and other services usually are, he explained, noting that it can be turned into savings instead.
“We also expect an increase in savings as people build up a ‘rainy day fund’ given that people now realize something as game changing such as an ECQ is possible, and with still no vaccine out there, we may have to contend with ECQ Part 2 down the line,” Mapa added.
Asuncion, for his part, said that he was expecting the increase in percentage of Filipinos with savings during the last half of March—or when the Luzon-wide lockdown began.
More Filipinos with savings
According to the latest Consumer Expectations Survey by the Bangko Sentral ng Pilipinas (BSP), the percentage of households with savings jumped to 37.8 percent in the first three months of 2020, which was higher than the 36.3 percent notched the previous quarter. The latest figure was also the highest since the first quarter of 2013.
“The higher number of savers was due to the increase in the number of households with savings in the middle-income group, which more than offset the decrease in the number of savers in the high- and low-income groups,” BSP explained.
Respondents identified emergencies, health and hospitalization, education, retirement, business capital and investment and purchase of real estate as the factors that impelled them to save.
The households with savings are keeping their money in different types of savings institutions—banks (73.9 percent); home (60.2 percent); and cooperatives, credit associations and investments (50.9 percent).
The survey was conducted from January 29 to February 10. Majority or 40.8 percent of the respondents came from middle-income households, followed by high-income group and low-income group at 29.9 percent and 29.2 percent, respectively.